Interview with Linda Mottram, ABC 702

It is. This morning I went for a walk around the harbour and I’ll tell you…

LINDA MOTTRAM:

Nice?

TREASURER:

…there was a few sighs of relief to get out of Canberra.

LINDA MOTTRAM:

I’m sure, I’m sure. Let’s get to some of that in a moment. Can I start by talking about the Budget though given that that’s the big thing on your plate? The PM said this week that you bit off more than you could chew in the Budget and that the Government will change. You say you have got no choice but to persist with the approach you have taken because I think the quote – reaching for the paper – yesterday was, ‘Budget pressures will crush the country’. You can’t both be right?

TREASURER:

We can because the Prime Minister has said we can’t give up on trying to repair the Budget, and he said that with me at a major announcement we made about foreign investment rules on Tuesday. You can’t keep borrowing $100 million a day just to pay your daily bills, which is what the government is doing. It is unsustainable over the long-term. So, unless you are going to dramatically increase taxes, you actually have to reduce your spending and we need to reduce spending to try and maintain a good quality of services and that means if we all contributed a little bit along the way, you are still getting the same services and the government is able to reduce the spending overall and stop borrowing $100 million a day just to pay the bills.

LINDA MOTTRAM:

Sure, I am sure a lot of people accept that as a sort of starting point but do you accept that the Budget was unfair to the young, the sick and the poor – to less advantaged Australians?

TREASURER:

Not at all, not at all. I’ll tell you why. You know, if you and I are enjoying free healthcare…

LINDA MOTTRAM:

It’s not free – we are paying for it through Medicare

TREASURER:

Medicare only covers half the cost; the Medicare Levy only covers half the cost of Medicare, let alone hospitals. So, it only covers half the cost of Medicare. When you and I go and visit the doctor, if we are getting it for free, it means a cleaner working in Sydney earning $65,000 a year is helping to contribute to our free visit to the doctor. If we contribute a little bit more individually, those that can afford to pay, and we have specifically already excluded pensioners, anyone on a healthcare card, children, all excluded. If you and I, Linda, contributed a little bit to go and visit the doctor, we can make sure that we are going to have the same quality of service – maybe even better service in the years ahead and we are not relying on some other Australian to help to subsidise our visit to the doctor.

LINDA MOTTRAM:

Okay, since we are on the medical issue, do you support the idea though, of universal taxpayer funded healthcare as a national good in perpetuity, because that’s what Australians have [inaudible]?

TREASURER:

Oh yeah, yeah, absolutely, but universal healthcare does not preclude people contributing to visit a doctor…

LINDA MOTTRAM:

But they [inaudible] but those, for example who have private healthcare, many people – those people…

TREASURER:

Well, that’s right. That’s why it is not universal and free…

LINDA MOTTRAM:

It is universally available, though?

TREASURER:

Yeah, that’s right, and it should be universally available. I mean, there is no argument about that.

LINDA MOTTRAM:

So, why not just raise the Medicare Levy if you are committed that universality?

TREASURER:

Because the Medicare levy has already gone up to pay for the National Disability Insurance Scheme…

LINDA MOTTRAM:

And Australians were very happy to do that.

TREASURER:

Well, they were but it still doesn’t cover the full cost of the National Disability Insurance Scheme. You see, this is the thing, all of the taxes that have been increased in the past don’t cover the full cost of expenditure going forward and what happened was, and we said this before at the election and we say it today, we inherited a situation where the previous Government locked in spending that was growing much faster than the economy and if government spending is growing much faster than the economy, you either have to reduce that spending or you have to increase taxes. If you increase taxes, it actually slows down the economy and starts to cause people to lose their jobs.

LINDA MOTTRAM:

Alright, and this where you get onto the argument that we are risking intergenerational theft – is the phrase you use when you are talking about the deficit issue but let me just play, if you would just pop some headphones on, sorry to do that to you, it will probably mess your hair up. Let me play this to you, this is Professor Bill Mitchell, he is the Director of the Centre of Full Employment and Equity at the University of Newcastle, with perhaps a slightly different view on that issue:

Now, that’s emotional but it’s not accurate in any way at all because even the most basic principles of public finance that you will find from an economist is that you’ve got to match benefits with the costs of provision of, say, public infrastructure and things like bridges and public transport systems, schools, public hospitals, they provide benefits over a number of generations not just the immediate generation that’s provisioning them.

That’s Bill Mitchell with his view of that and a lot of our listeners accept that that’s a good argument and they don’t feel that you are taking that on board.

TREASURER:

Well, it is a good argument for a state government, which actually does build schools and hospitals and roads, and a big part of the state budget is actually infrastructure – that’s their primary job. The Federal Government…

LINDA MOTTRAM:

[Inaudible]

TREASURER:

Well, no it comes through the GST, so it comes from our book but it’s actually the GST that pays for it. Most of our expenditure is money in and money out. We don’t actually build a lot of roads and schools and hospitals – the states do. So what we do is we basically, for example, 10 per cent of our Budget goes in pensions – 10 per cent of our Budget. So, around a third of the Federal Government Budget is welfare and then you have got Medicare, pharmaceutical benefits schemes, then you have got higher education and then you start to get into defence and foreign aid and a range of other things. So, we actually don’t, for the money we are borrowing – $100 million a day to pay our bills – very little of that is actually going in infrastructure.

LINDA MOTTRAM:

But they are still – it is still money, is it not, going to things that benefit the nation; there is a benefit in those borrowings, using your [inaudible]

TREASURER:

It is daily costs, and if you borrow to fund your daily costs, sooner or later it becomes an unsustainable amount. Now, the second key issue, and this is a really important one, Linda, that has been lost in the entire debate because the Federal Government, I emphasise again, has very little infrastructure spending even though we’ve got the biggest infrastructure program in Australia’s history rolling out, we’re actually funding some of the states for that and we are using the proceeds of the sale of, for example, Medibank Private, we’re recycling it into infrastructure. So, that’s how we are paying for the new infrastructure but overall, of the around $400 billion we spend every year, most of it actually goes in payments to people or services through Medicare and so. Now, if I can just come back to the other point, one of the reasons why Australia can’t have the borrowing levels of other countries like Japan is because we actually – we have a big country with a small population. We actually import money to help grow our economy and we have done that since 1788. We’ve basically borrowed from the rest of the world, built things – built mines, built infrastructure and so on. Therefore, we’re actually very exposed to international volatility, unlike Japan, which funds all of its borrowings – government borrowings from its domestic savings, we don’t have the domestic pool of savings. So, our banks for example, are competing with the Federal Government to borrow money to fund the loans that they give out. Every home loan, not exactly at the moment but on average, every home loan that we take out from a bank, about 30 per cent of that, 20 to 30 per cent of that comes from overseas through the bank. So, the Federal Government when it borrows money, it borrows about 60 to 70 per cent of that money from people who are living overseas even though we issued the debt here, overseas-based people lend us the money. So, the more we have to rely on overseas funding, the more exposed our economy is to the sort of volatility we have seen in the last few years.

LINDA MOTTRAM:

But welcome to the global economy, I mean…

TREASURER:

No, no, there are other countries that do not have that challenge. I mean, that’s why Japan – Japan have lots of challenges…

LINDA MOTTRAM:

A lot of challenges, yeah…

TREASURER:

That’s right…

LINDA MOTTRAM:

We don’t want to be Japan…

TREASURER:

That’s right, but Japan this year for the first time is going to have government debt that is going to exceed the total pool of domestic savings. Now, that’s an alarm bell, but countries like China have a huge pool of savings and the United States [inaudible] have no problems funding themselves but the Europeans, well they’ve got massive systemic problems.

LINDA MOTTRAM:

Okay, let’s get back to some of the stuff that affects people in their daily lives…

TREASURER:

That does. I will tell you why because ultimately it means even though interest rates are very low now, you start to face challenges into the future because interest rates rise and they rise faster than you would expect and that represents further risk. So, if the government can live within its means, it helps Australians to have more affordable and more accessible credit.

LINDA MOTTRAM:

It’s a quarter to ten on 702 ABC Sydney. The Federal Treasurer, Joe Hockey is my guest. In the interest of advancing debate, we are trying to work through some of these complex questions. You can send a text if you like 1300 222 702 or you can text 0467 922 702. Just on unemployment, the figures out yesterday – and we know there’s issues around, you know, some of the measurements and so forth, but over time we know that unemployment is up above six per cent. We don’t like that. It’s not good.

TREASURER:

No.

LINDA MOTTRAM:

You decided to restrict entitlement to unemployment benefits at the same time you took money away from some of the programs like Youth Connections, Partnership Brokers that specifically were designed to help young people get into jobs usually using linkages with business, interestingly. They have been distraught about not being able to deliver those services. Why is that good policy?

TREASURER:

We have had other policies put in place, such as training policies, where in fact we are giving students that are undertaking training like advanced diplomas and so on, access to fee help like the old HECS fee – the fee help, the government will lend them money to finish their associate diplomas. We have also significantly beefed up the funding for apprentices, giving them a payment that goes over a number of years to make sure they finish their apprenticeship and then that payment is repaid only in part if they finish their apprenticeship. For those who are over 50, we’re providing an incentive – financial incentive to business called Restart, which is a way of giving the business the incentive to actually employ those people. Now, ultimately, jobs are going to be created, I mean we have had a massive dislocation over the last two years, including under Labor, in the Australian economy as investment in the mining sector has turned into production. So, for example in Queensland – we saw 16,000 jobs go in Queensland in the last 18 months because of the massive drop off in investment in infrastructure. So, what are we doing? Well, we are trying to get new infrastructure built; nothing is more exciting than what is happening in Sydney at the moment in NSW, and Mike Baird is leading the charge in that regard and he is taking precious government capital out of assets and putting it into new infrastructure, which is creating tens of thousands of new jobs.

LINDA MOTTRAM:

But not everyone agrees that those assets should be sold. I mean…

TREASURER:

I understand that but if we don’t sell the assets, we have to borrow the money and if we borrow the money, we may – we struggle to repay it…

LINDA MOTTRAM:

But there is a whole other way of thinking about the deficit and about borrowing money, which we can talk about in a moment, but if I can get back to the unemployment programs.

TREASURER:

Sure, yeah.

LINDA MOTTRAM:

Things like Youth Connections, Partnership Brokers, they’re not dealing with people who can easily get into a course or an apprenticeship. They are dealing with disengaged people – people who really are going to struggle getting into the workforce at all and yet they’ve been cut.

TREASURER:

Well, I can’t talk about those specific programs but I can say that we have introduced new funding and new programs because ultimately, some programs don’t work, Linda. I mean, they might sound good…

LINDA MOTTRAM:

[Inaudible]

TREASURER:

I don’t know what [inaudible] to be fair, I can’t give you the box and dice on that particular program. We’ve just gone to tender for a new job network and we have over 700,000 people going through that job network program…

LINDA MOTTRAM:

Isn’t this just part of the problem, though? You get a new government and that government says, ‘what that last lot did’, we’re going to do it differently.

TREASURER:

But it didn’t work. Hang on, hang on, Linda…

LINDA MOTTRAM:

These are people at the coal face…

TREASURER:

Yes…

LINDA MOTTRAM:

Getting young disengaged people into work.

TREASURER:

I am not doubting – again, I just emphasise, I haven’t seen that particular program. All I can say is, whatever was happening previously wasn’t working because when we came into government, 200 jobs a day were being created in Australia. Today, 600 jobs a day are being created in Australia. Now…

LINDA MOTTRAM:

The unemployment rate’s up to 6.4 per cent; there are more people in the workforce. There’s more people in the workforce.

TREASURER:

Six hundred jobs a day were created. Now, if we had of stayed at 200 jobs, unemployment would be 7.5 per cent today, not 6.4 per cent, but it’s still too high. Now, in order to get it down, you have to get the economy going and get it growing faster.

LINDA MOTTRAM:

Everybody understands that.

TREASURER:

No, no, I am not sure – hang on…

LINDA MOTTRAM:

[Inaudible] I think the feeling out there is that the economy is not – it’s sluggish. You’ve been in office for 16, 17 months; when’s that going to shift?

TREASURER:

I want it to shift. I am trying to get it to shift and things that have been unpopular but necessary have helped to make it shift.

LINDA MOTTRAM:

Okay, let’s get to – its 10 to 10, we will. We’ll run short of time, unfortunately.

TREASURER:

I’m okay. I could go on all morning. I love my ABC.

LINDA MOTTRAM:

We were told you were a bit short on time. I’m glad you’re not – that’s fantastic. There’s a whole raft of submissions – this is the submission time of year. They’ll be falling into your in-tray like so much rain. There’s a lot of other suggestions for how to cut spending and just a couple of them, cause it is a long list: ACOSS, for example, says you could save $13 billion in 2015-16 and $18 billion in 2016-17 by axing the private health insurance rebate, curbing the use of trusts and private companies, superannuation taxation changes, which are seen as elitist [inaudible] will be targeted, tax rebates and concessions [inaudible] the list goes on.

TREASURER:

Yeah, yeah.

LINDA MOTTRAM:

There are other submissions also making suggestions, which are different to the ones that you have put out there, which have proven so unpopular. Will you take different suggestions to the Budget this time around?

TREASURER:

I saw Cassandra Goldie, the head of ACOSS – actually ran into her yesterday and I have a high regard for her. The things that ACOSS may think work, the Business Council may think don’t work and things the Business Council think work, ACOSS may take a different view. Everyone has a different view. Ultimately, the way we go through it is, is it going to help the economy, is it going to strengthen job creation, that’s number one – strengthening jobs. Number two, is it going to be fair and that means is everyone going to make a contribution, except for those most vulnerable, and how can we ensure that those most vulnerable get a leg up and get all the assistance they need?

LINDA MOTTRAM:

And did your last Budget do that?

TREASURER:

Again, I come back to it. I don’t see how it is fair for a cleaner working through the night in an office building in Sydney to be in a position where they are paying 60 per cent of the fees – contributing 60 per cent of the fees of someone going to university. All we are asking is that they contribute 50 per cent instead of 60 per cent. So, we’re not walking away from helping with fees, but for that cleaner, for the first time under our higher education changes, their child will get all their costs covered going to university through 30,000 scholarships. Now, that didn’t happen before. It’s not happening right now. This whole argument about free education is not real.

LINDA MOTTRAM:

Well, we know that it is not free…

TREASURER:

But that’s been the mantra, hasn’t it? You admit that? That has been the mantra of…

LINDA MOTTRAM:

It’s a matter of whether you – I mean, there are two views aren’t there, basically? There’s a view that says in the broad as a matter of principle, there’s a view that says it’s our society collectively, we should all contribute to those things that give us the best possible society.

TREASURER:

Yeah, I agree…

LINDA MOTTRAM:

But things that we can’t cover reasonably ourselves like education and health, we have governments to help us spread the load. We all accept that we will be playing different parts in that – that’s the consensus. You come along and say, ‘well, I’m just going to start tipping that.’

TREASURER:

No, I don’t accept that. I mean, it’s not tipping it because we are not saying government’s walking away. We’re saying government – taxpayers, most of whom don’t go to university, are going to contribute half the cost instead of 60 per cent and as a compensation for that, 30,000 people from the lowest income houses that have the capacity to go to university are going to go there for free under scholarships, because at the moment, those people who are from lower-income households who have the capacity to go to university, somehow they have to pay. Now, I think that’s actually fair that we’re actually helping those people and at the same time as almost all the vice-Chancellors are saying, you are going to get a better education system.

LINDA MOTTRAM:

Well, that’s starting to shift a little bit too.

TREASURER:

It isn’t actually, it isn’t actually.

LINDA MOTTRAM:

The reality Joe Hockey is…

TREASURER:

Come on, Linda, it isn’t. No, most of the Vice-Chancellors are arguing vigorously for the higher education reforms because they know that they are going to be smashed by global competition over the next 20 or 30 years and if they can’t compete, the quality of our education is going to deteriorate.

LINDA MOTTRAM:

Okay, let me ask you this then: why are you so unpopular? Why was your Budget so unpopular?

TREASURER:

Because we have to do what is right. I mean, this is not ‘vote in a celebrity’. Politics is about doing what is right. Now, we could have communicated the justifications better – there is no doubt about that and in a few weeks – I will release the Intergenerational Report where we have a conversation – a genuine conversation with the Australian people about all of the challenges…

LINDA MOTTRAM:

That’s the five year [inaudible]

TREASURER:

But it looks forward 40 years and on the one hand it tells a very exciting message about where Australia’s heading. I have no doubt that we are on the threshold of our greatest ever era as a nation – no doubt in my mind, it is very exciting, but also we have some challenges and if we meet head on those challenges, we will take great advantage of our future. Otherwise, we will become a victim of the future.

LINDA MOTTRAM:

Alan Jones this week said, ‘I pay 48 cents in the dollar’ – I don’t quote Alan Jones very often, I have to say – 48 cents in the dollar tax but if I put my super in, I pay 15. I get a 33 cent in the dollar concession. Superannuation concessions are costing the government $49 billion a year. If someone is in a $3 million home with $100,000 in the bank, they get the full age pension. You can see where I am going with this; will you change the superannuation concessions?

TREASURER:

Again, we will consult with various stakeholders along the way.

LINDA MOTTRAM:

Do you feel that it is unfair, that it is imbalanced?

TREASURER:

You know, the fact is, superannuation is hugely important for individuals so that they can fund their retirement and there have been – ultimately, it’s the individual’s money. I mean, it’s not government money. All the money that people have in super is in fact their money and they should be…

LINDA MOTTRAM:

But are the concessions too generous?

TREASURER:

Obviously we made a commitment before the last election that we would not change superannuation for at least three years. Now, the previous Government tried in this area and it became so complicated we were told it was unable to be legislated. We’ve obviously got a report from David Murray about the banking system and about retirement income; we’re considering that. I am not ruling anything in or out. I am not playing those sort of games but we are looking far and wide for the opportunity to get the Budget back to the point where we, as a nation, live within our means.

LINDA MOTTRAM:

You confident you will be the Treasurer come the next election?

TREASURER:

Are you confident that you are going to hold the morning spot in [inaudible]?

LINDA MOTTRAM:

Well, actually I am really interested in going home and working on my garden, but no seriously…

TREASURER:

I am serious too.

LINDA MOTTRAM:

There are question marks around…

TREASURER:

It is ridiculous. I mean, it is not about me Linda. I didn’t go into politics for me. I don’t get a rush out of doing interviews. I don’t get a rush out of a title on the door. I get a rush out of making my country better – that’s what I get a rush out of. I get a rush out of actually looking at the kids in the playground and saying, hopefully I am making their lives better. That’s what drives me. Now, people speculate about me. I am sick of talking about me and I think the Australian people are sick of talking about me.

LINDA MOTTRAM:

Okay, two minutes to the news, and that’s what we in the business call a hard switch. So, they will chop us off. The Prime Minister, Tony Abbott this week has not been flash on the back of that very close vote on Monday. Do you think he will be the Prime Minister come the next election?

TREASURER:

Yes, and why? Because we’re getting on with the job. I mean, this morning I wanted to talk with you about an issue that is a barbeque stopper in Sydney and that is foreign investment in residential real estate. Now, we haven’t talked about that, but we made a major announcement this week about foreign investment in agricultural real estate. I’ll have more to say about foreign investment in residential property – maybe you will have me back on the program and we can talk about those things.